OGC Op. No. 04-03-24
The Office of General Counsel issued the following opinion on March 29, 2004, representing the position of the New York State Insurance Department.
Re: Electronic Policy Issuance and Insured Records Management On-line
Is an insurers proposal to implement an optional Internet based ("on-line") program for electronic policy issuance and records management for its personal line insureds violative of the New York State Insurance Law and regulations promulgated thereunder?
No. There is nothing in the New York State Insurance Law and regulations that prohibits an insurance company from sending personal homeowners or automobile insurance policies electronically to insureds who agree to receive their insurance policies electronically. Similarly, there is no law that prohibits an insurance company from offering to its insureds insurance records management on-line. As long as the insurance policies delivered to consenting insureds on-line meet the requirements contained in the Insurance Law and regulations and the forms have been filed with the Department for use in New York, the insurers proposed program does not violate the Insurance Law or regulations.
An insurer proposes to add a new program ("Program"), which will be made available to its personal line insureds, in regard to automobile and homeowners insurance. The Program would complement the existing electronic insurance application program that has already been implemented by such insurer. The insurer is not a direct writer of insurance and utilizes insurance agents to sell and service its insurance products. Under the electronic application program, the insurers insurance agents use a computer program provided to them by the insurance company. A client sits next to an agent who works on a computer, inserting the clients answers to the questions in the application. The completed application is printed out by the agent and the applicant, after reviewing the application, affixes his or her "wet signature" to the application for submission to the insurer. Most of the insurers agents participate in the electronic application program.
The Program that the insurer now proposes to implement would be made available to its insureds who wish to receive their insurance policies electronically and who also wish to keep track of their insurance policy records on-line. The insurers agents, when they input the data onto the electronic application, would ask the applicant whether they wish to receive their policy electronically or on paper. If the client indicated his or her interest in obtaining the policy electronically the client would then be given a PIN number and ID (the policy number) with which he or she could access a secured portion of the insurers Internet Web site and reach his or her policy(ies), declarations pages and premium information. The Program also includes a feature in which insureds who forget their PIN numbers can submit their policy numbers on-line and receive information back from the insurer to enable them to access the secure portion of the Web site.
For those insureds who opt to participate in the Program their policies as well as coverage and billing information would be made available to them via a secured site on the Internet, accessible only to the insured and the insurance agent. The Program would enable personal line insureds to have electronic access to their insurance policies, address their coverage concerns and view their policy premium information. Such insureds would not be sent their insurance policies by U.S. Postal Mail but rather would be able to download and print out their policies, which will be in PDF format, from their areas of the insurers Web site. The insurance contract language is the same for all insureds; only the electronic equivalent of the declarations page will indicate which coverages the particular insured has obtained and the amount of coverage purchased by them. The on-line policies will be read-only documents that cannot be altered.
The insurer will not be sending insureds bills electronically under the Program. Bills will still be sent by the insurance company to the insured by U.S. Postal Mail. What will be available to the insured on-line is the premium upon the policy(ies) and billing status information only. Similarly, cancellation and non-renewal notices will also still be sent on paper by U.S. Postal Mail. The Program also does not enable insureds to apply on-line for additional coverages. In order to obtain additional coverage, the insured would have to contact their insurance agent. Nor can insureds make claims under their policies on-line.
The insurer anticipates making enhancements at some unspecified point in the future to the Program. These enhancements include access to billing information, claims information and placing electronic versions of home appraisals on-line. The insurer is not asking for the Departments opinion on such future enhancements at this time.
The Program appears to complement the electronic application component of the insurers business plan and will be made accessible only to those insureds who wish to take advantage of being able to obtain and store their insurance policies and to keep track of their billing payments by electronic means.
The Department, in Circular Letter No. 33 (1999), advised that insurance transactions may be effected by electronic means since most existing provisions of the New York Insurance Law and regulations do not proscribe such activities. This Department has consistently encouraged the use of technology in the conduct of an insurance business.
For example, as to electronic records maintained by an insurance company or its agent, the Department has taken the position that an electronically signed document may constitute a record that is maintained in a durable medium within the meaning of N.Y. Comp. Codes R. & Regs. tit 11 § 243 (1996) (Regulation 152). Therefore, if the electronic records comply with the standards contained in the aforementioned regulation, it would be acceptable as a means of records retention as to an insurance company or its agent.
In this instance, the insurers proposed Program would enable the insurance company to send its insurance policies electronically to those of its insureds who consent to it and to maintain on-line records of the insureds policies accessible to such insureds for the benefit of the insureds. The concerns of the Department are similar as when an insurance company maintains electronic records. The integrity of the electronic documents must be maintained and the electronic documents must comply with all New York statutory and regulatory requirements. The insurer has demonstrated to our satisfaction that the insurance policies it will issue on-line are read-only documents that cannot be altered and that they are identical to the policies filed with the Department for use in New York.
Electronic records may not be denied legal effect, validity or enforceability solely because they are created electronically under both the federal Electronic Signatures in Global and National Commerce Act ("E-Sign"), 15 U.S.C.A. §§ 7001-7013 (West Supp. 2002) and the New York Electronic Signatures and Records Act ("ESRA") which is contained in the New York State Technology Law §§ 101-109 (McKinney 2003). Neither of the foregoing electronic laws supersede the requirements of the New York Insurance Law or regulations applicable to an insurance company doing business in New York. Every insurance company that chooses to incorporate an electronic technology into its business operation must decide for itself which technology is best for it to adopt and implement and, it must satisfy itself that by adopting such technology it will keep the insurance company fully in compliance with applicable provisions of the New York Insurance Law and regulations.
There is no statutory requirement in New York State that a homeowners or automobile insurance policy be delivered to the insured in a particular manner. Therefore, as long as an insured agrees to receive this type of
insurance policy on-line by means of a secured on-line site, it is legally permissible in New York and does not violate the New York Insurance Law or regulations. There is also nothing in the New York Insurance Law or regulations that proscribes maintaining insurance records, such as declarations pages, electronically. Of course, whether an insurance policy is sent to the insured on paper or electronically, the coverages which are required by law - - such as the standard fire policy and automobile liability - -must be included in the insurance policy and the amount of coverage chosen by the insured must be accurately reflected in either a paper or an electronic declarations page of the policy. Furthermore, no matter the form in which the policy exists, paper or electronic, the policy form format and language that has been approved for use in New York by the Department must be included.
Insofar as the insurance policies to be delivered to the insureds who choose to participate in the Program comply with the New York State Insurance Law and regulations, cannot be altered, and are only accessible by the insured and his or her agent, the Program does not violate the Insurance Law.
For further information you may contact Associate Attorney Barbara A. Kluger at the New York City Office.